The Two Faces of Asia: Working Together for a Poverty-Free Region
Address to the Board of Governors by
Haruhiko Kuroda
President
Asian Development Bank
At the 39th Annual Meeting
5 May 2006
Hyderabad, India
I. Introductory Remarks
Your Excellencies, Ladies, and Gentlemen:
It is a privilege to join the Chairman, the Honorable Sri P. Chidambaram, Minister of Finance of India, in welcoming all of you to the 39th Annual Meeting of the ADB Board of Governors. We are honored by the presence of His Excellency Dr. Manmohan Singh, Prime Minister of India, at our meeting this morning. I would also like to warmly welcome ADB's newest members, Armenia and Brunei.
On behalf of everyone here today, I extend our deep appreciation to the Government and the people of India for their warm hospitality, and for welcoming the Asian Development Bank to Hyderabad. With its rapid growth in science and technology and its distinguished educational and research institutions, Hyderabad is a showcase for the potential of today’s knowledge economy, and an inspiration for cities across the region.
II. The Two Faces of Asia
For decades now, the world has watched in admiration as the people of the Asia and Pacific region transformed their economies—transformed through creativity, hard work, and commitment to market reform. Trade has flourished and the pace of growth has soared.
The face of Asia is changing. Today, hundreds of millions of people enjoy a better quality of life. The middle classes are growing, and Asia’s place in the world is rising.
But open the lens wider, and another face appears.
In this region of increasing prosperity, one in five people still cannot access safe drinking water. Half the population is without proper sanitation. In this region of rising aspirations, more than 4 million children will die this year, never reaching their fifth birthday. And the same rapid development that has raised living standards from Shanghai to Mumbai has put the region’s ecosystems in peril—endangering the livelihoods of the poor.
Absolute poverty is declining. But inequality is growing. Poverty—in all its aspects—is still our region’s most daunting problem. Thus, the abiding passion, vision, and mission of the Asian Development Bank continues to be the elimination of poverty.
III. Tackling Urgent Challenges
The question now is: How do we respond to these two faces of Asia?
Based on recent growth rates, the number of people living on less than a dollar a day could fall to about 100 million by 2015 if the benefits of growth are equitably shared. But if growth slows and inequality increases, the number of desperately poor will still be nearly 350 million.
In the new era of development, what will it take to realize our dream of a poverty-free Asia?
In the long term, new thinking will be needed to solve the problems of today and tomorrow—problems like rising unemployment, aging populations, rapid urbanization, and the widening gap between rich and poor. New thinking is needed to capitalize on opportunities and ensure our continued, collective progress.
To this end, I am convening a panel of eminent persons to provide us with insights on the region’s future. The panel’s views will be discussed at our 2007 Annual Meeting and will help guide us in a comprehensive, consultative review of our Long Term Strategic Framework. This will also help refine ADB’s role in a changing Asia and Pacific.
But the poor cannot wait. In the medium term, there is much we can do to begin closing gaps in incomes and opportunities. Pragmatic, sensible solutions for inclusive social development and sustained, equitable growth; a focus on good governance; and a commitment to environmental responsibility will benefit everyone in the region, and they will certainly benefit the poor.
Our new medium term strategy, now being finalized, speaks directly to these priorities. And it recognizes that, if we work together, we will go further—and faster—in spreading the benefits of growth to those who have been left behind.
Fostering Inclusiveness
The Millennium Development Goals set clear targets for eliminating all forms of poverty. As I have said before, the Asia and Pacific region represents the world’s best hope for achieving the MDGs. Today’s momentum of growth provides the means to extend the advantage of growth to the disadvantaged. Including the poor in the region’s development is fundamental to sustaining growth and social stability. Ensuring that all citizens have access to education and health services, safe water, and other essentials of life—this is our moral, social, and economic imperative.
A few weeks ago, I met a woman in Jaipur, Rajasthan, who had just given birth to quintuplets in a women’s hospital rehabilitated with ADB funds. She told me what a difference the hospital was making—for her, for other women, and for their children to get the healthy start so many of us take for granted.
Across the region, there are numerous stories of dramatic progress. In Viet Nam, investments in health care services cut infant mortality rates by half, and raised life expectancy by almost 5 full years. In East Asia, large investments in education brought literacy rates to over 90%. In Pakistan, one microfinance bank has helped more than 50,000 women build their own businesses—helping these women to increase their incomes, educate their children, and contribute to the development of their communities.
ADB has the experience—and the expertise—to tackle rural underdevelopment, bring the benefits of health and education to the poor, and empower women and underprivileged groups to share in a country’s prosperity.
By working with countries and other development partners, we will tap the rich skills of specialized agencies to continue to meet the diverse needs of our members. Working together, we can create an Asia-wide zone of hope and opportunity; one Asia, sharing responsibility for the dignity and well-being of all.
Promoting Pro-Poor Growth
Achieving the MDGs will require substantial levels of additional investment, particularly in infrastructure, to sustain high economic growth, and extend basic services to the poor.
The provision of safe water and better sanitation is of utmost importance for eliminating poverty, hunger, and disease. And effective management of scarce water supplies is crucial for food security and environmental sustainability. That is why we recently announced a plan to increase our investment in the water sector to over $2 billion a year. Over the long term, it is expected that our “Water for All” program will provide access to safe water and improved sanitation for about 200 million people.
But clearly, neither governments nor development institutions will be able to meet the region’s demand for infrastructure. East Asia alone needs $1 trillion over the next few years for transport, energy, and utilities. The only way these demands can be met is to substantially increase private sector participation.
Operating in both the public and private spheres, ADB can bring public and private partners together to tackle this tremendous challenge. Our investment and risk guarantees for the Nam Theun 2 project in Lao PDR helped mobilize a total investment of nearly $1.5 billion. Revenues from this project will improve livelihoods, rural infrastructure, irrigation systems, water supply, schools, and health services for some of the poorest people in Asia.
We can do more, and we will. The new financing instruments we introduced last year will strengthen our ability to engage the private sector in bridging the investment gap for a poverty-free, prosperous Asia and Pacific.
These efforts will be combined with strong measures to improve the regional investment climate. Even today, Asia’s own large private savings are flowing out of the region, when they could go a long way to meeting investment demands at home. This need not be so.
One solution is bond market development. ADB is supporting this development through multi-currency bond offerings, regional guarantee mechanisms, assisting with credit and trading systems, and helping to publicize Asia’s investment opportunities to the world.
Improving Governance and Preventing Corruption
But one of the most important things any country can do to attract investment is to improve governance. Research suggests that improving even a single aspect of governance—such as regulatory efficiency or controlling corruption—can, over time, bring about a significant increase in per capita incomes.
There is a growing commitment among our developing member countries to strengthen public finance and remove market distortions, improve legal and regulatory frameworks, and eliminate corrupt practices. We are prepared to do everything we can to help sharpen the region’s competitive edge.
While good governance is fundamental for growth, it is equally important to ensure that individuals are treated fairly and with dignity. All evidence shows that when governance is weak, it is the poor who suffer the most.
Let me take this opportunity to reiterate our commitment to strictly uphold our governance and anticorruption policies in ADB operations. We are working closely with other multilateral development banks to develop a common framework for preventing and combating fraud and corruption. And, in all our projects and programs, unethical actions will not be tolerated.
Managing the Environment
Responding to the two faces of Asia, we must curtail the environmental damage caused by rapid growth. The poor will only grow poorer if the negative consequences of growth continue. Less arable land, reduced food supplies, and depleted natural resources spell disaster for millions of people—in Asia and around the world.
We at ADB feel a special obligation to help move the region to a more sustainable path, particularly in sectors where we are actively engaged. With the region’s large appetite for energy, this sector must receive our special attention. We cannot continue to rely on fossil fuels and an aging energy infrastructure. Over the last 30 years, Asia’s share of greenhouse gas emissions has soared from less than one tenth of global emissions to nearly one quarter.
To address this important issue, ADB is working on an Energy Efficiency Initiative to expand our investment in clean energy projects to $1 billion a year. We are also introducing a Carbon Market Initiative that will address climate change and energy security, with significant benefits for both developing and industrialized countries.
By working together to make the best use of our resources, we can leave a cleaner, more enduring legacy for future generations.
Regional Cooperation and Integration
While Asia as a whole has made tremendous progress, it is still very much a patchwork of development. I believe that deeper regional cooperation and integration is the thread to transform this region into a harmonious tapestry of progress for all.
Asian economies are blossoming as trade opens within the region, and to the world. The South Asian Free Trade Agreement is the latest expression of this openness—a landmark agreement that will benefit all the economies of South Asia. To capitalize on this trend, countries are coming together to build cross-border infrastructure and harmonize policies and regulations. The ADB-supported Greater Mekong Subregion program, which brings together five Southeast Asian countries with the People’s Republic of China, is making great strides forward through regional cooperation.
When I visited Central Asia last year, I watched the work on the Bishkek-Osh road in the Kyrgyz Republic—a project that will open new transport routes to the PRC, Russia, Europe, and the Middle East. The people of Asia have much to gain from strategic investments linking them to the global economy. Countries working together can do much more than they can alone: create more growth, attract more investment, generate jobs and opportunities—this reduces poverty.
The Asian financial crisis highlighted the downside of openness—the vulnerability that comes with increased interdependence. But it also inspired governments to strengthen the region’s financial architecture to protect against future financial stress.
Across the region, countries are joining forces to confront problems that transcend borders—problems like natural disasters, HIV/AIDS, SARS, and the avian flu. None of us will forget how the region—and the world—came together to help the countries that were struck by the Indian Ocean tsunami. None will forget the images of ordinary citizens pulling friends and neighbors from the rubble of the South Asia earthquake.
All of these events and developments—our setbacks, as well as our progress—should inspire us to take our cooperation efforts even further. Regional cooperation and integration is an idea whose time has come.
Imagine an Asia-wide economic community. A community of nations where borders are fully open to trade and investment. A community that works together for financial health and shares responsibility for its natural and human resources. An Asian community that offers competitive, complementary markets for the benefit of all its members, as well as the rest of the world. If we can envision all this, I know we can achieve it.
The move toward greater regional cooperation and economic integration is one of the most important trends in Asia’s development. And I am convinced that, by working together, we can consolidate the gains of recent decades, and leverage the power of cooperation for greater stability and prosperity.
IV. Toward One Asia: Our Continuing Commitment
One thing is clear: Asia today stands at a defining moment. Asia’s time has come.
We are a resourceful region—a region with the maturity, experience, and confidence to make the policy and investment choices that will finally lift the veil of poverty from our region.
There can be only one Asia—one face of Asia, with opportunities open to all. An Asia and Pacific where every individual can live with dignity—free of poverty and sharing in prosperity. I assure you, ADB will continue to be your partner in this journey for human progress.
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